Remember that your credit score doesn’t exist for you. It’s not for your benefit. It’s for the benefit of lenders, and they don’t give a damn how unfair the system is.
This is what people are missing. Credit score is a completely valid metric, but it’s just a measure of how likely lenders are to make money off of you.
There’s a mess of things that go into their formula, but as I recall one of them is actively paying on things. We had our daughter get a credit card and told her that, instead of using her ATM all the time, she should use the credit card, but pay it off every month. Doesn’t cost her anything to do that, and it builds a credit rating way more than having a card with a zero balance. Doing that, they’ll also end up raising your limit, which increases your rating too. Oh, and if you pay your credit bills as soon as they come due instead of just before the deadline, that also increases your rating.
Seriously. “I rarely take on debt, regularly save aggressively, and pay off my debts as quickly as is convenient” means I’m bad to loan to in their eyes when if you had evidence of all that as an ordinary person I’m exactly who you’d want to loan money to.
That’s how I’ve tried to be (and currently have no debt!).
When I needed to buy a car a few years ago, they gave me a terrible rate because I had a bad score. I had paid off a couple of personal loans AND all my student loans…but it’d been a few years so my credit score had dropped. So fuck me for not borrowing money every day.
I ended up doing a co-sign for a better rate. And guess what? I paid off that car loan a couple years early and got dinged on my credit just like the original post.
But I know they don’t care about any of that and are actually mad I didn’t pay the minimum for the entirety of the loan.
While this is all technically correct it’s still dogshit that your score goes down when you do the thing you are supposed to do with a loan.
Your options are:
Take out a loan and pay it off: score goes down
Take out a loan and don’t pay it off/default: score goes down
Remember that your credit score doesn’t exist for you. It’s not for your benefit. It’s for the benefit of lenders, and they don’t give a damn how unfair the system is.
This is what people are missing. Credit score is a completely valid metric, but it’s just a measure of how likely lenders are to make money off of you.
What I don’t get is: since she paid off her car loan, she’d have more disposal income now…? Shouldn’t that increase her credit score?
There’s a mess of things that go into their formula, but as I recall one of them is actively paying on things. We had our daughter get a credit card and told her that, instead of using her ATM all the time, she should use the credit card, but pay it off every month. Doesn’t cost her anything to do that, and it builds a credit rating way more than having a card with a zero balance. Doing that, they’ll also end up raising your limit, which increases your rating too. Oh, and if you pay your credit bills as soon as they come due instead of just before the deadline, that also increases your rating.
Ah! I get it. So it’s a valid metric in theory. It’s shit for everyone in practice.
Seriously. “I rarely take on debt, regularly save aggressively, and pay off my debts as quickly as is convenient” means I’m bad to loan to in their eyes when if you had evidence of all that as an ordinary person I’m exactly who you’d want to loan money to.
That’s how I’ve tried to be (and currently have no debt!).
When I needed to buy a car a few years ago, they gave me a terrible rate because I had a bad score. I had paid off a couple of personal loans AND all my student loans…but it’d been a few years so my credit score had dropped. So fuck me for not borrowing money every day.
I ended up doing a co-sign for a better rate. And guess what? I paid off that car loan a couple years early and got dinged on my credit just like the original post.
But I know they don’t care about any of that and are actually mad I didn’t pay the minimum for the entirety of the loan.